Ebit loss (before special items) in the second quarter was €182 million, a margin of negative 5.5%, substantially down on a positive Ebit of €94 million (margin of 2.7%) in Q2 2021.
It meant the company had pulled back losses slightly from the first quarter, resulting in an Ebit loss before special items for the first half of 2022 of €511 million (-8.8% margin), 6.1 percentage points lower than in the first half of 2021.
The Danish turbine manufacturer’s operating profit for Q2 (Ebitda) came in at €42 million in its preliminary results and it reported an overall net loss of €119 million, compared with a €765 million loss for the first quarter.
The company said that since the start of the year the cost of withdrawing from the Russian market and halting service and construction activities in Ukraine following the start of the war had reached €367 million. Changes in the company’s manufacturing footprint in China and India have cost €215 million.
Sale of converter and controls business
Vestas reiterated fears over supply chain instability and announced the sale of its converters and controls business, with around 600 employees, to KK Wind Solutions. KK will exclusively supply converters and control panels to Vestas from its three factories and the two companies will carry out joint development of converters.
Despite its fears over the supply chain and “a high degree of cost inflation, causing volatility in the demand for wind power”, Vestas said it maintains its ambition to grow faster than the market and be the market leader by revenue. Under current market conditions it expects to achieve a longstanding aim of 10% Ebit margin before special items by 2025.
However, the outlook continues to be testing for the company. Order intake over the quarter (2,153 turbines) was half that of the previous year (5,290 turbines), although the company said that reflected strong order intake in northern Europe and Asia Pacific in 2021.
Vestas said it had increased the price of its onshore wind turbines to €0.96m/MW, a 22 percent increase year-on-year.
Group president and CEO Henrik Andersen said the company had retained its leadership position in onshore turbines. It took in orders for 1,199MW of onshore turbines in the EMEA area, 896MW in the Americas and 28MW in the Asia Pacific region in the quarter.
Andersen highlighted “sustained price increases [that] show we maintain the discipline to protect value creation and pave the way towards our profitability target”. The company’s expected income from its new orders in the period was up 15% per MW (€2.1 billion compared with €4.5 billion in 2Q 2021).
Offshore turbine orders were just 30MW in EMEA, although the company has a global order backlog for offshore turbines totalling 2,893MW.
Following an initiative to integrate offshore turbines into a single organisational footprint and the introduction of the V236-15 MW offshore turbine last year, Vestas said it expects an active year fulfilling its order backlog, but a decline until 2025 while it invests in the organisation, supply chain and technology for the sector. By 2025 it aims to be “a leading player” in offshore.
Commenting on Vestas' results, Ben Nuttall, senior analyst for industrials at Third Bridge, said: “In the midst of positive policy support from The Inflation Reduction Act and the German Easter package, the wind space continues to face huge supply chain challenges, which combined with a long lead time between prices and costs being set has caused havoc for margins.”
He added: “The war in Ukraine has been mixed for Wind, because although it has accelerated policy discussion it has also exacerbated supply chain challenges, specialists we speak to see it being net positive from 2025 onwards.”